When it comes to food service, it’s all about providing a good meal in minimal time. Home-cooked meals are no exception, but on a weeknight after a long day at work, a nutritious dinner may have to take the backseat to takeout or frozen pizza. The meal kit offers a delicious, healthy home-cooked meals in 30 minutes or less. With a variety of online recipes and dishes to choose from, all the ingredients arrive at your doorstep in a neatly packaged box for you to assemble like Ikea furniture (with less confusing instructions).

Companies like Just Add Cooking and Plated provide dinners for $8-$10 a person, coming in a bit above the average expense for groceries. They have proven their popularity amongst customer groups like Millennials and working parents, who have expendable income and lack the time or skill to plan, purchase, and prepare dinner.

Impact of Wage Hikes

Wages have risen for restaurant workers in the past few years, and with more minimum wage hikes and declining sales (read more on how to be prepared here), restaurant profits are suffering. The natural response is to raise prices, but that move is proving a dangerous for some. Rather than paying elevated prices for takeout or delivery, diners are opting for groceries or meal kits, whose price point is steady and home cooked aspect is appreciated.

The cost of construction is also going up as hourly rates for workers rise. Chain restaurants seeking to break ground on new locations may have to hold off, while delivery-based meal kit services continue to thrive.

Profit Potential

The $4 billion dollar meal kit market makes up only a tiny fraction of the food and grocery industry, but several companies are pursuing it.

Three weeks ago, Amazon became one of those companies. With a huge new player in the game, we have yet to see if more revenue be snatched from restaurants and grocery stores. The delivery juggernaut has already given investors cold feet on market competitors like Blue Apron. Don’t let them take a bite out of your sales too!

Next Steps

(1) How can restaurants stay ahead of falling profit margins? Assess every aspect of your restaurant to see where you can save. Time is money, so it’s more important than ever to consider the efficiency with which tasks are carried out.

(2) Take a look at where you’re sourcing your materials and ingredients to see if you can find better options. Reduce your electricity and water bills by opting for energy-efficient appliances. Adjust your recruiting process to ensure that you’re adding the best candidates to your team. Well-trained, competent, and happy employees will reduce turnover rates and time spent on training new hires.

(3) Alternatively, if you can’t beat ‘em, join ‘em. Offering to deliver to your customers will increase the volume of orders and boost sales. Denny’s recently saw an uptick in off premise dining after offering on-demand delivery this May. Delivery is the biggest trend in hospitality, so if you’re not already using services like Grubhub and Seamless, it’s worth looking into.